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Mike Lynch, once one of the UK’s leading tech entrepreneurs, was acquitted of criminal charges by a jury in San Francisco on Thursday, capping a 12-year legal saga stemming from one of Silicon Valley’s biggest-ever fraud cases.
The former Autonomy chief executive was accused of falsely inflating revenues at the UK software company ahead of its $11bn sale to Hewlett-Packard in 2011. The verdict is a moment of vindication for Lynch after a long battle that saw him extradited to the US and subjected to house arrest under 24-hour surveillance ahead of the trial.
Lynch, 58, has long claimed he was used as a scapegoat by HP for its own botched acquisition and later mismanagement of Autonomy. He unsuccessfully argued that any criminal charges should be heard in the UK. After a two-and-a-half-month trial, the jury, which began deliberating on Tuesday afternoon, found him not guilty on all counts, along with Stephen Chamberlain, Autonomy’s former vice-president of finance, who was also on trial.
Prosecutors accused Lynch and Chamberlain of illegally inflating revenues in the two years before the acquisition by backdating some of Autonomy’s contracts, using “round trip” deals to compensate customers for making purchases from Autonomy, and hiding the fact that some of its high-margin software revenue was really coming from unprofitable hardware sales.
They faced 14 counts of wire fraud and one count of conspiracy. Another charge, of securities fraud, was thrown out by the judge near the end of the trial.
The sale of Autonomy was a high point for the UK tech scene at a time when the “Silicon Fen” region around Cambridge, where it was based, was rising to prominence. Autonomy’s software, used to sort through information that is not held in structured databases, was seen as a critical piece of technology for large companies and governments, making it central to HP’s efforts to rebuild its floundering computer hardware business around software.
However, the US company wrote down its investment by $8.8bn just a year later, blaming $5bn of the hit on what it claimed was the fraudulent ramping-up of Autonomy’s revenues in the years before the deal. A successor company, HPE, largely prevailed in a civil claim against Lynch in the UK in 2022 and is seeking $4bn in damages.
Autonomy’s former chief financial officer, Sushovan Hussain, was found guilty of fraud over similar charges and released in January after serving a five-year sentence in the US. Prosecutors argued that letting Hussain be seen as the central figure in the fraud had left Lynch, the chief executive, free to personally exercise control “without creating a paper trail” back to himself. They sought to depict him as a domineering and controlling boss who aggressively attacked critics.
Testifying during the trial, Lynch claimed he had left detailed accounting and contract matters to others at the company and his own attention was focused on technical and marketing issues, leaving him ignorant of any fraud.
Lynch, who completed a doctorate at Cambridge, rose to become one of the great and the good of the UK’s tech industry, serving on a science group that advised the UK prime minister and on committees at the Royal Society. He was awarded an OBE for services to enterprise in 2006 and in 2012 founded venture capital firm Invoke Capital, whose investments include the cyber security company Darktrace.
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